On the Road Again: It’s Time for Manufacturers to Review Business Travel Expense Deduction Rules

Business travel has been picking up again this year. If your manufacturing company has recently resumed travel to visit key customers and suppliers — or is planning to soon — it’s a good time to review the tax rules for deducting domestic business travel expenses.

The basics

An employer may deduct an employee’s “ordinary and necessary” expenses for travel away from home on business. Travel expenses are ordinary and necessary if they’re business-related, reasonable under the circumstances, and not “lavish or extravagant.” Unfortunately, there’s no bright-line definition of lavish or extravagant.

Generally, travel is considered away from home if:

It requires an employee to be away from the general area of his or her tax home for substantially longer than an ordinary day’s work, and
The employee can’t reasonably be expected to meet the demands of the work activities without sleep.

Typically, an employee’s tax home is the general vicinity (city and surrounding suburbs) of his or her regular place of business. Special rules apply for employees who work in multiple locations, don’t have a fixed place of business (for example, because they’re on the road most of the time), or are on temporary assignment away from their regular place of business.

Traveling away from home doesn’t necessarily require an overnight stay. Let’s say you drive to a city four hours away, meet with clients and prospects all day, and then catch a few hours of sleep at a hotel before driving back at 10 p.m. Because it would be unreasonable to expect you to make the round trip in one day without rest, you’re considered to be traveling away from home for tax purposes.

Travel deductions

So, what can employers deduct? Deductible travel expenses include, but aren’t limited to:

Transportation expenses, such as air, rail or bus fares, or the costs of operating and maintaining a car,
Taxi fares or other local transportation expenses,
Baggage charges,
Hotel or other lodging expenses,
Meal expenses (subject to the rules discussed below),
Dry cleaning and laundry expenses, and
Telephone or computer rental expenses.

To substantiate these expenses, employees must keep credit card receipts, canceled checks, bills or other adequate records for all lodging, as well as other travel expenses greater than $75. (Note that some employers require documentation of all expenses.) These records should show the amount, date, place and essential character of the expense.

Meal deductions

Ordinarily, business meals are 50% deductible. However, under the Consolidated Appropriations Act, otherwise eligible business meals provided by a restaurant (including carryout) are 100% deductible through the end of 2022.

Employers can deduct the cost of meals employees eat alone when traveling. You’re also permitted to take a deduction for meals if 1) a business owner or employee is present, 2) the meal is provided to a business contact (such as a customer, prospect, consultant or vendor), 3) the meal serves an ordinary and necessary business purpose, and 4) the meal isn’t lavish or extravagant.

Entertainment expenses aren’t deductible. But employers may deduct the cost of food or beverages provided during an entertainment activity if they’re purchased separately or stated separately on a receipt or invoice.

Allocation of business and pleasure expenses

If you have employees who travel in the United States primarily for business but also spend some time on personal activities, you can deduct the full cost of their airfare or other transportation to and from the destination. However, lodging, meal and other qualified business expenses are deductible only for the business portion of the trip.

Typically, a trip is considered primarily for business if the employee spends more time on business activities than on personal activities — for example, if the employee spends five days at business meetings followed by a weekend at the beach. If a trip is primarily for pleasure, travel expenses aren’t deductible, although employers may still write off otherwise deductible expenses for business activities during the stay.

Revisit your expense policies

The rules for deducting travel and other business expenses are complex. Instead of deducting actual travel expenses, some businesses simplify the process by providing employees with allowances for lodging, meal and incidental expenses based on federal per-diem rates. Contact us for if you need clarification on business expense rules.

Each year, the Yeo Young Professionals group hosts a firm-wide service initiative. As the Yeo Young Professionals service chair for the Yeo & Yeo Foundation, I am leading this year’s service project to benefit Making Strides Against Breast Cancer.

Richardson Making Strides Participating in Making Strides walks has always been important for our employees. I was invited to the walks from the first year I joined the firm. Seeing our employees’ passion and hearing about their personal connections to the organization inspired me to make it our main event this year.

The Making Strides movement raises life-saving funds for breast cancer patients, survivors, thrivers, and caregivers. To show our support of the movement, all Yeo & Yeo employees have been encouraged to bring their friends and families to Making Strides walks across Michigan. Yeo & Yeo teams will participate in six walks – Making Strides of the Great Lakes Bay Region, Ann Arbor, Lansing, Oakland and Macomb Counties, and West Michigan. Our YPs will also do fundraising activities leading up to the walks and volunteering.

It has been a blast helping to coordinate the teams. I am excited to lead the Young Professionals service project and support such a great cause.

I give back because I want to offer a collective service opportunity to everyone at Yeo & Yeo.

Any form of identity theft can be costly, unsettling, and take months — sometimes years — to fully recover from and repair. But tax-related identity theft can be particularly disturbing because it involves the IRS, about which many people already harbor suspicion and anxiety. Although the IRS has taken significant steps in recent years to help minimize the occurrence of tax-related identity theft, this type of fraud continues to occur. Here’s how to avoid becoming a victim.

Individuals and businesses are vulnerable

If criminals use your information to file an income tax return to claim your refund, the first notification of fraud you receive may be a denial of your return. Tax returns are identified via Social Security numbers (SSNs) and the IRS won’t accept two returns with the same taxpayer identity. Thieves make a point of filing as early as possible to get a jump on the legitimate taxpayer.

Tax-related identity theft isn’t limited to personal returns. Business identity theft can occur when a fraud perpetrator uses an Employer Identification Number (EIN) associated with your business to file a return. In either case, if the IRS receives a fraudulent request for a refund, it could issue it to the criminal via direct deposit or check.

4 red flags

Often, the IRS is responsible for uncovering tax-related identity fraud when confronted with the problem of two separate returns. But you also should be on the lookout for red flags, for example:

Your return is rejected. The most unambiguous indication of tax-related identity theft is when the IRS rejects your return based on a duplicate SSN or EIN. You may learn this immediately if you e-file your return.
The IRS notifies you. When the IRS discovers a suspicious tax return, it will contact the affected taxpayer through the mail. If you receive a letter indicating a problem, the IRS may ask you to complete a form to prove your identity. The IRS might also notify you that there’s a new online account in your name or that someone has taken over your existing account.
You’re asked to pay additional taxes. To trigger a refund payment, criminals often submit fictitious information to the IRS. If the agency conducts a review and learns that the return associated with your SSN or EIN contains incorrect amounts (usually after a return is processed), it may ask you for more money. The IRS could notify you that you owe additional tax, that it’s withholding a future refund or that it plans to take collection actions.
IRS records are incorrect. Criminals often invent sources of income to appear legitimate to the IRS and facilitate a refund. If, for example, the IRS issues an EIN you didn’t request, a criminal may be using your business’s identity to submit fraudulent returns.

How to report fraud

If it appears your tax-related identity has been stolen, your need to complete IRS Form 14039, Identity Theft Affidavit as soon as possible. The IRS then will assign your case to one of its employees who’s trained to help identity-theft victims. The employee will determine the scope of the fraud, make any necessary corrections to IRS records and assign to you a personal identification number to prevent criminals from using your SSN or EIN to file returns in the future.

You may also need to notify your state’s tax authority. Although less prevalent (because refunds generally are smaller), it’s possible someone could use your SSN or EIN to file a fake state tax return.

Prevent it from happening in the first place

Of course, the best defense against tax-related identity theft is offense. File early before a potential scammer can file a fraudulent return in your name. Ensure that your computer is well-protected from viruses, malware and other hacker weapons and watch out for phishing emails. Also take advantage of the ID.me program. After you verify your identity, you can use your ID.me account to securely communicate with the IRS and various other government agencies.

If you suspect you’ve become a victim of fraud or have questions about protecting your own or your business’s identity, contact us.

In today’s tough job market and economy, the Work Opportunity Tax Credit (WOTC) may help employers. Many business owners are hiring and should be aware that the WOTC is available to employers that hire workers from targeted groups who face significant barriers to employment. The credit is worth as much as $2,400 for each eligible employee ($4,800, $5,600 and $9,600 for certain veterans and $9,000 for “long-term family assistance recipients”). It’s generally limited to eligible employees who begin work for the employer before January 1, 2026.

The IRS recently issued some updated information on the pre-screening and certification processes. To satisfy a requirement to pre-screen a job applicant, a pre-screening notice must be completed by the job applicant and the employer on or before the day a job offer is made. This is done by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.

Which new hires qualify?

An employer is eligible for the credit only for qualified wages paid to members of a targeted group. These groups are:

Qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program,
Qualified veterans,
Qualified ex-felons,
Designated community residents,
Vocational rehabilitation referrals,
Qualified summer youth employees,
Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP),
Qualified Supplemental Security Income recipients,
Long-term family assistance recipients, and
Long-term unemployed individuals.

Other rules and requirements

There are a number of requirements to qualify for the credit. For example, there’s a minimum requirement that each employee must have completed at least 120 hours of service for the employer. Also, the credit isn’t available for certain employees who are related to or who previously worked for the employer.

There are different rules and credit amounts for certain employees. The maximum credit available for the first-year wages is $2,400 for each employee, $4,000 for long-term family assistance recipients, and $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit of $9,000 over two years.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

A beneficial credit

In some cases, employers may elect not to claim the WOTC. And in limited circumstances, the rules may prohibit the credit or require an allocation of it. However, for most employers hiring from targeted groups, the credit can be beneficial. Contact us with questions or for more information about your situation.

The popularity of telehealth grew exponentially when the COVID-19 pandemic hit in the spring of 2020. Many people have now returned to in-person appointments with their physicians, though virtual visits remain a convenient option under some circumstances.

The situation has motivated many employers to formally offer telehealth as an employee benefit. As a result, a common question arises: Is such a benefit subject to the Employee Retirement Income Security Act (ERISA)?

Key definition

The answer is generally yes. Telehealth, sometimes also referred to as telemedicine, is typically offered under a group health plan — which is indeed governed by ERISA if sponsored by a private sector employer. Even if telehealth is offered separately from the employer’s group health plan, the benefit can still be subject to the law if it’s considered all or part of an ERISA welfare benefit plan.

In general, an ERISA welfare benefit plan is a plan, fund or program established or maintained by an employer to provide employees with ERISA-listed benefits. Let’s break down each element as it relates to telehealth and whether the benefit would be subject to ERISA:

A plan, fund or program. An arrangement that provides “one-off” benefits and, thus, doesn’t require an “ongoing administrative scheme” might not be considered a plan, fund or program subject to ERISA. But it’s difficult to imagine a telehealth benefit that wouldn’t involve ongoing administration, so this element would likely be met.

Established or maintained by an employer for its employees. If an employer explicitly offers telehealth as a health care benefit, this element would probably be met.

Provides ERISA-listed benefits. Medical benefits are among those listed in ERISA. As telehealth is clearly medical care, this element would likely be met.

DOL safe harbor

Under a regulatory safe harbor issued by the U.S. Department of Labor, certain group insurance arrangements are exempt from ERISA even if they provide ERISA-listed benefits. An arrangement is exempt under this safe harbor if the following requirements are met:

The employer makes no contributions.
Participation is completely voluntary.
The employer doesn’t endorse the arrangement and its involvement is limited to permitting the insurer to publicize the program and collecting and remitting insurance premiums.
The employer receives no consideration for collecting and remitting premiums other than reasonable compensation.

A voluntary employee-pay-all telehealth benefit offered by a third party, with employer involvement limited to the permitted activities set forth in the safe harbor, probably wouldn’t be an ERISA plan.

Rules to follow

If your organization’s telehealth benefit does fall under the purview of ERISA, which is likely the case, you’ll need to ensure the benefit complies with the applicable rules. These include having a plan administrator, following claims and appeals procedures, and providing a summary plan description. Our firm can help you assess the costs of any benefits you offer or are considering, including the impact of ERISA compliance.

If you’re charitably inclined, it may be desirable to donate assets held in a trust. Why? Perhaps you’re not ready to let go of assets you hold individually. Or maybe the tax benefits of donating trust property would be more attractive than making an individual donation.

Before moving forward, it’s important to understand the differences, for tax purposes, between individual and trust donations and the circumstances under which donations by a trust are deductible.

Tax treatment of individual donations

Generally, you’re permitted to deduct charitable donations for income tax purposes only if you itemize. Itemized charitable deductions for cash gifts to public charities generally are limited to 50% of adjusted gross income (AGI), while cash gifts to private foundations are limited to 30% of AGI. Note that through 2025, the Tax Cuts and Jobs Act increased the limit for certain cash gifts to public charities to 60% of AGI.

Noncash donations to public charities generally are limited to 30% of AGI and 20% for donations to private foundations. If you donate appreciated long-term capital gain property to a public charity, you’re generally entitled to deduct its full fair market value. But with the exception of publicly traded stock, deductions for similar donations to private foundations are limited to your cost basis in the property.

Deductions for ordinary income property (including short-term capital gain property) are limited to your cost basis, regardless of the recipient.

Tax treatment of trust donations

The discussion that follows focuses on nongrantor trusts. Because grantor trusts are essentially ignored for income tax purposes, charitable donations by such trusts are treated as if they were made directly by the grantor, subject to the rules applicable to individual donations. Also, this article doesn’t discuss trusts that are specifically designed for charitable purposes, such as charitable remainder trusts or charitable lead trusts.

Making charitable donations from a nongrantor trust may have several advantages over individual donations, including the ability to claim a charitable deduction even if you don’t itemize deductions on your individual income tax return. And a trust can deduct up to 100% of its gross taxable income, free of the AGI-based percentage limitations previously discussed.

In addition, trust deductions can be more valuable than individual deductions because the highest tax rates for trust income kick in at much lower income levels. If you’re contemplating a charitable donation from a trust, there are a few caveats to keep in mind:

The trust instrument must authorize charitable donations.
The donation must be made from (that is, traceable to) the trust’s gross taxable income. This includes donations of property acquired with such income, but not property that was contributed to the trust.
Unlike certain individual charitable donations, deductions for noncash donations by a trust generally are limited to the asset’s cost basis.

Special rules apply to trusts that own interests in partnerships or S corporations, as well as to certain older trusts (generally, those created on or before Oct. 9, 1969).

Make the most of charitable deductions

If income limits or restrictions on itemized deductions have hampered your ability to deduct charitable donations, consider making donations from a trust. We can help you determine if this is a tax-wise option for your situation.

Every business owner should establish strong policies, procedures and internal controls to prevent fraud. But don’t stop there. Also be prepared to act if indications arise that, despite your best efforts, wrongdoing has taken place at your company.

How you handle the evidence obtained could determine whether you’ll be able to prove the charges brought against the alleged perpetrator and win the case in court.

Protect the chain

Handling paper documents is relatively easy as long as you approach the task with care. Place any hard copies related to the possible fraud in a secure location. The fewer people who touch them, the better.

Don’t make notes on the relevant paper documents. Instead, write notations about when and where they were found, and how you preserved them, in a separate log. You can copy anything you need to continue operations and turn the originals over to your professional advisors or law enforcement for fingerprinting, handwriting analysis or other forensic testing.

Remember, a court case can be derailed if you don’t preserve the chain of evidence and can’t prove to a judge’s satisfaction that documents haven’t been tampered with.

Train IT staff

Digital evidence generally presents more challenges — especially if your IT staff isn’t trained to react to fraud incidents. Even if these employees are highly skilled at setting up and troubleshooting hardware and software, they’re unlikely to be fully aware of the legal ramifications of dealing with a computer or mobile device used to commit fraud.

To avoid the inadvertent destruction or alteration of evidence, arrange for specialized training that teaches IT employees to respond appropriately when fraud is suspected. They should be instructed to stop any routine data destruction immediately. If your system periodically deletes certain information, including emails, IT staff should suspend the process upon notification that something is amiss.

In many cases, it’s wise for businesses to engage a qualified computer forensics expert to assist in the investigation. These professionals can identify and restore:

Deleted and altered records,
Digital forgeries, and
Intentionally corrupted files.

They also can access many password-protected files and pinpoint unauthorized system access.

Act immediately

According to the Association of Certified Fraud Examiners’ “Occupational Fraud 2022: A Report to the Nations,” a typical scam goes on for 12 months before detection, and the median loss amounts to $112,000.

The message is clear: Fraud can have a severe financial impact on your business and take a long time to recover from. Be sure you’re ready to act immediately if evidence arises. Let us help you set up defenses against fraud and assist you in any investigations that come up.

My wife and I moved from Freeland to Alma in 2018, and we are both very passionate about childcare and supporting youth. We have three children, and my wife was an elementary school teacher before becoming a stay-at-home mom. After moving to Alma, we saw there was a need for more childcare and learning facilities. I also wanted to help give back to my new community, as I had been heavily involved, volunteering for many organizations in Saginaw.

Wilson at the Alma Office - Children Discovery Academy So, I decided to join the board of the Children’s Discovery Academy (CDA) and help further the organization. I was able to lend my financial background and expertise to the board. We navigated through the pandemic, partnered with some local businesses, and finally began accepting students. Today, class sizes at the center range from 15 to 25 kids per day.

It has been really special to be a part of the CDA. They provide a valuable service to our community, offering play-based learning and quality childcare in an area that really needed it.

I give back because I want to help offer affordable, quality childcare to members of my community.

For the ninth consecutive year, Yeo & Yeo has been selected as one of Michigan’s Best and Brightest in Wellness. The program highlights companies and organizations that promote a culture of wellness, as well as those that plan, implement and evaluate efforts in employee wellness.

“Investing in the overall health of our employees is something we take pride in,” said Dave Youngstrom, President & CEO of Yeo & Yeo. “We are honored to receive recognition for our longstanding commitment to enabling our staff to live a healthier lifestyle at home and in the workplace.”

Yeo & Yeo supports wellness for its employees by paying a large portion of health care premiums, helping to keep costs low for employees. The firm has a high percentage of participation in its wellness plan and health care premium reduction incentive. The firm offers free health screenings for health care participants and flu shots at no cost. An Employee Assistance Program provides confidential guidance and resources designed to support work‐life balance. Yeo & Yeo also offers an Ergonomic Standing Desk option for employees for a healthier work environment.

Criteria for selection included wellness programs and policies, culture and awareness, leadership, participation and incentives, communication and measurement, among others.

Yeo & Yeo and the other winning companies will be honored at the Best and Brightest Virtual Award Celebration on November 9.

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have businesses in federally declared disaster areas.

Monday, October 3

The last day you can initially set up a SIMPLE IRA plan, provided you (or any predecessor employer) didn’t previously maintain a SIMPLE IRA plan. If you’re a new employer that comes into existence after October 1 of the year, you can establish a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence.

Monday, October 17

If a calendar-year C corporation that filed an automatic six-month extension:
- File a 2021 income tax return (Form 1120) and pay any tax, interest and penalties due.
- Make contributions for 2021 to certain employer-sponsored retirement plans.

Monday, October 31

Report income tax withholding and FICA taxes for third quarter 2022 (Form 941) and pay any tax due. (See exception below under “November 10.”)

Thursday, November 10

Report income tax withholding and FICA taxes for third quarter 2022 (Form 941), if you deposited on time (and in full) all of the associated taxes due.

Thursday, December 15

If a calendar-year C corporation, pay the fourth installment of 2022 estimated income taxes.

Contact us if you’d like more information about the filing requirements and to ensure you’re meeting all applicable deadlines.

Your CPA offers a wide menu of services. One flexible offering, known as an “agreed-upon procedures” engagement, provides limited assurance on a specific aspect of an organization’s financial or nonfinancial information.

What’s covered?

Agreed-upon procedures can cover various items. For example, a CPA could perform procedures related to the reliability of a company’s accounts receivable, the validity of the sales team’s credit card payments, the effectiveness of the controls for the security of a system and even greenhouse gas emissions.

Lenders may request these types of engagements before they’ll approve a new loan application or an extension of credit for an existing customer — or they might want one if a borrower defaults on its loan covenants or payments. These engagements can also be useful in M&A due diligence, by franchisors or when a business owner suspects an employee of misrepresenting financial results.

Stakeholders don’t necessarily like waiting until year end to see how an organization is faring in today’s uncertain markets. Agreed-upon procedures can be done at any time, so they can provide much-needed peace of mind throughout the year.

What’s reported?

These engagements are based on procedures similar to an audit, but on a limited scale. When performing agreed-on procedures, CPAs issue no formal opinions; they simply act as fact finders. The report lists:

The procedures performed, and
The CPA’s findings.

Agreed-upon procedures can be relied on by third parties. But it’s the user’s responsibility to draw conclusions based on the findings.

What’s new?

Agreed-upon procedures are usually a one-time engagement, so you might not know much about them — or how the rules that apply to them changed a few years ago. A revised standard was published in 2019, bringing several key changes. Most notably, an accountant is now allowed to report on a subject matter without obtaining a written assertion from the responsible party that the responsible party complies with an underlying criterion, such as laws or regulations. This gives CPAs more flexibility when examining or reviewing certain documents if the engaging party can’t appropriately measure or evaluate them.

The revised standard also:

Enables CPAs to develop procedures over the course of the engagement,
Allows CPAs to develop or assist in developing the procedures,
Removes the requirement for intended users to take responsibility for the sufficiency of the procedures and, instead, requires the engaging party to simply acknowledge the appropriateness of the procedures before the issuance of the practitioner’s report, and
Permits the CPA to issue a general-use report.

The new guidance went into effect for reports dated on or after July 15, 2021, although early implementation was permitted.

Contact us

In today’s uncertain marketplace, agreed-upon procedures can provide much-needed peace of mind throughout the year. We can help you customize procedures that fit the needs of your organization and its stakeholders.

The term “probate” is one you’ve probably heard and might associate with negative connotations. But you may not fully understand what it is. For some people, the term conjures images of lengthy delays waiting for wealth to be transferred as well as bitter disputes among family members. Others, because the probate process is open to the public, worry about their “dirty laundry” being aired out. The good news is that there are strategies you can employ to keep much or all of your estate out of probate.

Probate primer

Probate is predicated on state law, so the exact process varies from state to state. This has led to misconceptions about the length of probate. On average, the process takes six to nine months, but it can run longer for complex situations in certain states. Also, some states exempt small estates or provide a simplified process for surviving spouses.

In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document to the county courthouse. If there’s no will — in legal parlance, the deceased has died “intestate”— the court will appoint someone to administer the estate. Thereafter, this person becomes the estate’s legal representative.

The process

With that in mind, here’s how the process generally works. First, a petition is filed with the probate court, providing notice to the beneficiaries named in the deceased’s will. Typically, such notice is published in a local newspaper for the general public’s benefit. If someone wants to object to the petition, they can do so in court.

The executor takes an inventory of the deceased’s property, including securities, real estate and business interests. In some states, an appraisal of value may be required. Then the executor must provide notice to all known creditors. Generally, a creditor must stake a claim within a limited time specified under state law. The executor also determines which creditor claims are legitimate and then meets those obligations. He or she also pays any taxes and other debts that are owed by the estate.

Ownership of assets is then transferred to beneficiaries named in the will, following the waiting period allowed for creditors to file claims. If the deceased died intestate, state law governs the disposition of those assets. However, before any transfers take place, the executor must petition the court to distribute the assets as provided by will or state intestacy law.

Ways to avoid probate

Certain assets, such as an account held jointly or an IRA or bank account for which you’ve designated a beneficiary, are exempt from probate. But you also may be able to avoid the process with additional planning. The easiest way to do this is through the initial form of ownership or the use of a living trust.

In the case of joint ownership with rights of survivorship, you acquire the property with another party, such as your spouse. The property then automatically passes to the surviving joint tenant upon the death of the deceased joint tenant. This form of ownership typically is used when a married couple buys a home or other real estate.

A revocable living trust may be used to avoid probate and protect privacy. The assets are typically transferred to the trust during your lifetime and managed by a trustee that you designate.

Protect your privacy

The reason many people dread the word probate is the fact that it’s a public process. But by using the right strategies, you can protect your privacy while saving your family time, money and hardship. We can help you implement the right techniques.

At Yeo & Yeo, we take pride in creating an environment that challenges, supports and rewards our employees. We are family-focused, community-driven and relationship-oriented. And we love to see our employees grow and succeed.

We are honored to have been named one of the 2022 Metro Detroit’s Best and Brightest Companies to Work For for the eleventh consecutive year. The Best and Brightest programs identify, recognize and celebrate organizations that exemplify Better Business. Richer Lives. Stronger Communities.

Yeo & Yeo is proud of the environment we have created for our employees. We offer an award-winning CPA certification bonus program, gold standard benefits, and hybrid and remote work capabilities. Our Metro Detroit staff shared four reasons why our firm is such a great place to work:

Empowerment: “Everyone at Yeo & Yeo is given opportunities to pursue things they are passionate about. Whether it is receiving a new certification or specializing in a certain industry, firm leadership empowers us to gain experience in areas we are interested in.” – Zaher Basha, CPA, CM&AA, Senior Manager
Flexibility: “One of the things I appreciate about Yeo & Yeo is that the company recognizes that each employee is different and is willing to be flexible to accommodate each employee’s needs. We have opportunities to work from home or enjoy flexible schedules outside of the regular 9 to 5. We are encouraged to find a path within the company that works for us and what we want to accomplish.” – Erin Flannery, CPA, CFE, Manager
Fun: “Everyone is having fun while they work. It’s not just about getting the work done, it’s about building friendships and connections, and everyone genuinely enjoys what they do.” – Nicholas McFadden, Senior Accountant
People first: “The way we treat our people is what makes us different. We are a people-first firm. Everyone is very close-knit. We are like a family, and we really help each other on an individual level. – Tammy Moncrief, CPA, Managing Principal

What will your story be? Apply today to write the next chapter in your career.

Yeo & Yeo, a leading Michigan advisory firm, is pleased to announce that Kellen Riker, CPA, and Steven Treece, CPA, were recently named recipients of the 2022 Flint & Genesee Group’s 40 Under 40 award. The program recognizes individuals under age 40 who are exceptional leaders in their companies and communities.

“40 Under 40 recognizes rising professionals, entrepreneurs and influencers who are helping to shape the future of Genesee County,” said Flint & Genesee Group CEO Tim Herman. “The honorees represent a new generation of talented professionals who are working diligently to help make Flint & Genesee a great place to live, work and play.”

Kellen Riker is a senior accountant and a member of the firm’s Government Services Group. His areas of expertise include audits for governments, school districts, nonprofits and for-profit organizations. He serves as the Yeo & Yeo Foundation grant committee representative for the firm’s Flint office. Riker holds a Master of Business Administration in finance from the University of Michigan-Flint.

“Kellen has shown tremendous growth and leadership throughout his career at Yeo & Yeo,” said Jennifer Watkins, CPA, principal. “He is dedicated to the community. Serving as a member of the firm’s Foundation office grant committee, he has helped members of the Flint office give back to Voices for Children, Quality Living Systems, the YMCA of Greater Flint and other organizations. He is well deserving of the 40 Under 40 recognition and should be proud of all he has accomplished as a young professional.”

Steven Treece is a senior manager and a member of the firm’s Agribusiness Services Group. His areas of expertise include tax planning and preparation, payroll tax consulting and business advisory services. As a mentor, Treece hosts the firm’s internal monthly podcast, where he helps staff build their client service skills. Treece holds a Bachelor of Business Administration in accounting from the University of Michigan. Passionate about supporting the community, Treece serves on the board of the Rotary Club of Burton and volunteers for the Food Bank of Eastern Michigan and the Genesee County Habitat for Humanity.

“Steven’s inclusion in the 40 Under 40 is a tribute to his dedication to client service,” said Becky Millsap, CPA, managing principal of the Flint office. “He enjoys working with clients to help them solve complex issues, and he has been a great leader and mentor. He was recently promoted to senior manager, and I am excited to see how he will continue to grow and support the firm and the community.”

Read the Flint & Genesee Group’s AND magazine featuring all the 40 Under 40 honorees.

The Give-A-Kid Projects have always been a large part of our community in Holt and the surrounding communities. When people here donate items, instead of taking them to Goodwill or the Volunteers of America, they take things to Give-A-Kid. The organization does a lot to help kids in our area, and they have different projects for different needs, like give-a-kid a coat, a backpack, and a Christmas.

Amy J Give-A-Kid Last year, the Lansing office sponsored a family with three children for Give-A-Kid a Christmas who asked for beds to sleep on as their gift. Seeing that request broke all our hearts. We thought, “These are our kids – kids in our school district – and all they asked for was a bed.” That hit home for all of us.

So, we decided to pull out all the stops. As an office, we raised funds to purchase beds for each kid. Then, we bought items to go with their bedrooms like bedding, pillows, and toys. It felt good to come together to support these kids and their families, and we plan to continue to sponsor more kids for future Christmases.

I give because I want to support kids in our community.

Does your business need real estate to conduct operations? Or does it otherwise hold property and put the title in the name of the business? You may want to rethink this approach. Any short-term benefits may be outweighed by the tax, liability and estate planning advantages of separating real estate ownership from the business.

Tax implications

Businesses that are formed as C corporations treat real estate assets as they do equipment, inventory and other business assets. Any expenses related to owning the assets appear as ordinary expenses on their income statements and are generally tax deductible in the year they’re incurred.

However, when the business sells the real estate, the profits are taxed twice — at the corporate level and at the owner’s individual level when a distribution is made. Double taxation is avoidable, though. If ownership of the real estate were transferred to a pass-through entity instead, the profit upon sale would be taxed only at the individual level.

Protecting assets

Separating your business ownership from its real estate also provides an effective way to protect it from creditors and other claimants. For example, if your business is sued and found liable, a plaintiff may go after all of its assets, including real estate held in its name. But plaintiffs can’t touch property owned by another entity.

The strategy also can pay off if your business is forced to file for bankruptcy. Creditors generally can’t recover real estate owned separately unless it’s been pledged as collateral for credit taken out by the business.

Estate planning options

Separating real estate from a business may give you some estate planning options, too. For example, if the company is a family business but some members of the next generation aren’t interested in actively participating, separating property gives you an extra asset to distribute. You could bequest the business to one heir and the real estate to another family member who doesn’t work in the business.

Handling the transaction

The business simply transfers ownership of the real estate and the transferee leases it back to the company. Who should own the real estate? One option: The business owner could purchase the real estate from the business and hold title in his or her name. One concern is that it’s not only the property that’ll transfer to the owner, but also any liabilities related to it.

Moreover, any liability related to the property itself could inadvertently put the business at risk. If, for example, a client suffers an injury on the property and a lawsuit ensues, the property owner’s other assets (including the interest in the business) could be in jeopardy.

An alternative is to transfer the property to a separate legal entity formed to hold the title, typically a limited liability company (LLC) or limited liability partnership (LLP). With a pass-through structure, any expenses related to the real estate will flow through to your individual tax return and offset the rental income.

An LLC is more commonly used to transfer real estate. It’s simple to set up and requires only one member. LLPs require at least two partners and aren’t permitted in every state. Some states restrict them to certain types of businesses and impose other restrictions.

Proceed cautiously

Separating the ownership of a business’s real estate isn’t always advisable. If it’s worthwhile, the right approach will depend on your individual circumstances. Contact us to help determine the best approach to minimize your transfer costs and capital gains taxes while maximizing other potential benefits.

According to Family Enterprise USA, 87% of U.S. companies are family businesses, which are responsible for 54% of gross domestic product or $7.7 trillion. Although family businesses are an economic pillar of strength, several studies have found that they’re more vulnerable to occupational fraud than other companies. Here’s what you need to know if you run a family business.

Loyalty can hamper prevention

Why might family businesses be more vulnerable to fraud than other companies? For one thing, prevention efforts can be hampered by loyalty and affection. One of the biggest obstacles to fraud prevention is simply not being able to acknowledge that someone in the family would be capable of initiating or overlooking unethical or illegal activities.

Like any other business, family enterprises must include a system of internal controls that make fraud difficult to perpetrate. It may be awkward to exercise authority over members of one’s own family, but someone needs to take charge if issues arise.

Outside advice is essential

Of course, the person in charge potentially could be the one defrauding the company. That’s why independent auditors and legal advisors are critical. Your family business should look outside its immediate circles of relatives and friends to retain professional advisors who can be objective when assessing the company. Audited financial statements from independent accountants, in particular, protect the business and its stakeholders.

If your company is large enough to have a board of directors, it should include at least one outsider who’s strong enough to tell you things you might not want to hear. In some extreme cases, members of all-family boards have been known to work together to bilk their companies. This becomes much more difficult to do if collusion requires an outsider to participate in illegal activities.

Action may be necessary

Another factor that makes preventing fraud in family businesses difficult is how they tend to handle fraud incidents. Even when legal action is an option, families rarely can bring themselves to pursue action against one of their own. Sometimes families choose to save the perpetrator from public scandal or punishment rather than maintain ethical professional standards. Most fraud perpetrators know that — and, indeed, count on it.

If you discover a family member is committing fraud within your business, ask a trusted attorney or CPA to explain to the perpetrator the illegality and possible consequences of the fraudulent actions. If such interventions don’t work, however, you may have no choice but to seek prosecution.

Remember your stakeholders

Not only can fraud be expensive and harm your family’s security, but there are also employees and other stakeholders to consider. To help prevent fraud and financial losses, set a strong example of high ethical standards and consult with professional advisors capable of casting an objective eye over your business’s operations.

Auditing standards require financial statement auditors to identify and assess the risks of material misstatement due to fraud — and to determine overall and specific responses to those risks. Here’s why face-to-face meetings are essential when assessing these risks.

Audit inquiries

Fraud-related questions are a critical part of the audit process. The AICPA requires auditors to identify and assess the risks of material misstatement due to fraud and to determine overall and specific responses to those risks under Clarified Statement on Auditing Standards (AU-C) Section 240, Consideration of Fraud in a Financial Statement Audit.

Specific areas of inquiry under AU-C Sec. 240 include:

Whether management has knowledge of any actual, suspected or alleged fraud,
Management’s process for identifying, responding to and monitoring the fraud risks in the entity,
The nature, extent and frequency of management’s assessment of fraud risks and the results of those assessments,
Any specific fraud risks that management has identified or that have been brought to its attention,
The classes of transactions, account balances or disclosures for which a fraud risk is likely to exist, and
Management’s communications, if any, to those charged with governance about its process for identifying and responding to fraud risks, and to employees on its views on appropriate business practices and ethical behavior.

Interviews must be conducted for every audit — auditors can’t just assume that fraud risks are the same as those that existed in the previous accounting period.

Beyond words

Although many audit procedures have been done remotely during the pandemic, auditors are now resuming face-to-face meetings with managers and others to discuss fraud risks. Why? Psychologists estimate that 7% of communication happens through spoken word, 38% through tone of voice and 55% through body language. So, when evaluating fraud risks during an audit, a face-to-face interview is critical to help pick up on nonverbal clues.

Nuances such as an interviewee’s tone and inflection, the speed at which he or she responds, and body language provide important context to the words being spoken. The auditor will also watch for signs of stress on the part of the interviewee in responding to questions, including long pauses before answering, starting answers over, profuse sweating or tapping feet.

In addition, in-person interviews provide opportunities for immediate follow-up questions. When it isn’t possible to have a face-to-face interview, a videoconference or phone call is the next best option because it provides the auditor many of the same advantages as meeting in person.

Let’s work together

External audits don’t provide an absolute guarantee that dishonest behaviors will be detected, but they can be an effective antifraud control. According to Occupational Fraud 2022: A Report to the Nations, companies that were audited lost one-third less from fraud than those that weren’t audited — and audited companies were able to detect fraud 33% faster than those without audited financial statements.

You can facilitate our efforts to assess your company’s fraud risks by anticipating the types of questions we’ll ask and the source documents we’ll need. Forthcoming, prompt responses help ensure that your audit stays on schedule and minimizes any unnecessary delays.

Generally, when a qualified retirement plan terminates with surplus funds, Internal Revenue Code Section 4980 imposes an excise tax on any plan funds and property that revert to the employer sponsoring the plan. This is referred to as “employer reversion.”

In Revenue Procedure 2022-28, the IRS recently notified qualified plan sponsors and employers that it won’t issue letter rulings on whether an employer reversion from a qualified defined benefit plan (commonly called a pension) has occurred in connection with a spinoff/termination transaction involving excess assets.

According to the IRS guidance, a “spinoff/termination transaction involving excess assets” is one in which:

The plan sponsor/employer spins off less than 100% of the assets of a defined benefit plan to another defined benefit plan that’s sponsored or maintained by the same employer — including members of the employer’s single-employer group,
The defined benefit plan receiving the spinoff assets is terminated within a short time after receiving those assets, and
Assets remain in the terminated defined benefit plan’s trust after all benefits are distributed to or on behalf of participants and their beneficiaries.

The base excise tax in question is 20% of the amount of any employer reversion from the plan. The excise tax increases to 50% of any employer reversion unless:

The employer establishes or maintains a “qualified replacement plan,” or
The terminating plan provides certain additional benefits that take effect on the termination date.

This two-tier excise rate structure has two primary purposes. First, it’s designed to recapture to the employer the tax benefits of tax-deferred earnings during the life of the plan. Second, it’s intended to encourage the plan sponsor to either maintain a qualified plan after terminating the defined benefit plan or to provide benefit increases before terminating the plan.

For all practical purposes, defined contribution plans — such as 401(k)s — generally aren’t subject to the excise tax. This is because defined contribution plans involve individual accounts. Thus, assets typically don’t revert to the employer upon plan termination. Rather, they’re distributed to the respective accounts of participants and beneficiaries.

If your organization sponsors a pension that could soon or eventually be subject to a spinoff/termination transaction involving excess assets, the recent Revenue Procedure brings important news. We can answer any questions you may have about the tax implications of your qualified retirement plan.

If you have a family member who’s disabled, financial and estate planning can be tricky. You don’t want to jeopardize his or her eligibility for means-tested government benefits such as Medicaid or Supplemental Security Income (SSI). A special needs trust (SNT) is one option to consider. Another is to open a Section 529A account, also referred to as an ABLE account, because it was created by the Achieving a Better Life Experience (ABLE) Act.

ABLE account details

The ABLE Act allows family members and others to make nondeductible cash contributions to a qualified beneficiary’s ABLE account, with total annual contributions limited to the federal gift tax annual exclusion amount ($16,000 for 2022). To qualify, a beneficiary must have become blind or disabled before age 26.

The account grows tax-free, and earnings may be withdrawn tax-free provided they’re used to pay “qualified disability expenses.” These include health care, education, housing, transportation, employment training, assistive technology, personal support services, financial management and legal expenses.

An ABLE account generally won’t affect the beneficiary’s eligibility for Medicaid and SSI — which limits a recipient’s “countable assets” to just $2,000 — with a couple of exceptions. First, distributions from an ABLE account used to pay housing expenses are countable assets. Second, if an ABLE account’s balance grows beyond $100,000, the beneficiary’s eligibility for SSI is suspended until the balance is brought below that threshold.

ABLE account vs. SNT

Here’s a quick overview of the relative advantages and disadvantages of ABLE accounts and SNTs:

Availability. Anyone can establish an SNT, but ABLE accounts are available only if your home state offers them, or contracts with another state to make them available. Also, as previously noted, ABLE account beneficiaries must have become blind or disabled before age 26. There’s no age limit for SNTs.

Qualified expenses. ABLE accounts may be used to pay only specified types of expenses. SNTs may be used for any expenses the government doesn’t pay for, including “quality-of-life” expenses, such as travel, recreation, hobbies and entertainment.

Tax treatment. An ABLE account’s earnings and qualified distributions are tax-free. An SNT’s earnings are taxable.

Contribution limits. Annual contributions to ABLE accounts currently are limited to $16,000, and total contributions are effectively limited to $100,000 to avoid suspension of SSI benefits. There are no limits on contributions to SNTs, although contributions that exceed $16,000 per year may be subject to gift tax.

Investments. Contributions to ABLE accounts are limited to cash, and the beneficiary (or his or her representative) may direct the investment of the account funds twice a year. With an SNT, you can contribute a variety of assets, including cash, stock or real estate. And the trustee — preferably an experienced professional fiduciary — has complete flexibility to direct the trust’s investments.

Medicaid reimbursement. If an ABLE account beneficiary dies before the account assets have been depleted, the balance must be used to reimburse the government for any Medicaid benefits the beneficiary received after the account was established. There’s also a reimbursement requirement for SNTs. With either an ABLE account or an SNT, any remaining assets are distributed according to the terms of the account or the SNT.

Examine the differences

When considering which option is best for your family, remember the key differences: An ABLE account may offer greater tax advantages, while an SNT may offer greater flexibility. We can help your family decide how to proceed to best provide for your loved one.